FTC rejects Cash Box and Holiday merger application

By Jackie Lin / STAFF REPORTER

A merger application filed by Holiday Entertainment Co (好樂迪娛樂事業) and Cash Box KTV (錢櫃) was rejected by the Fair Trade Commission yesterday as the government expressed concern that the strong market shares of the two companies could infringe on consumers' interests if allowed to merge.

The commission said that the combined revenues of the nation's two largest karaoke chains' made up about half of the total karaoke market, which has become a highly concentrated industry.

While the turnover of karaoke operators in Taipei City and county comprise up to one-third of the market nationwide, Holiday and Cash Box would acquire a monopoly status of 90 percent in the Taipei area if they merged, the commission added.

"Consumers would perhaps only realize that there were other karaoke companies when they visited central and southern Taiwan," said Lin Yi-yu (林益裕), the commission's acting spokesman.

The commission cited Article 12 of the Fair Trade Act (公平交易法) and said the application was rejected because the overall economic advantages of the planned merger would not outweigh the disadvantages that would arise from lack of competition.

In view of their strong market presence in the north, no other rivals in Taipei could compete. Monopolies not only lead to a lack of incentives to lower costs, produce innovation and boost service quality, but also tend to lead to unfair price hikes, the commission said in a press statement.

In addition, the commission worried that the merger would block newcomers from enteriing the karaoke market.

Shares of Holiday lost NT$0.95, or 5 percent, to close at NT$19.7 on the Taiwan Stock Exchange yesterday. The commission's decision was revealed before the stock market closed.

The company declined to comment as it had not yet received an official decision from the commission.

Cash Box, which is unlisted, said it would decide whether to appeal the ruling after it received official documents detailing why the application was refused and whether the commission's market share calculation was flawed, spokesman Eric Leu (呂嘉正) said.

The commission approved an initial merger application in 2003 with conditions. However, problems arose when the two companies disagreed on share swap proportions and operational ideas.

The application rejected yesterday was the companies' second and was submitted in December.